Hammack says Fed rates likely to remain on hold for now
Cleveland Fed President Beth Hammack says interest rates will likely remain on hold. She cited two-sided risks to the outlook amid ongoing energy price shocks.
Federal Reserve Bank of Cleveland President Beth Hammack stated on Wednesday that interest rates in the United States are likely to remain at their current levels for a good while. Speaking on CNBC, Hammack noted that while there is no immediate necessity to adjust the central bank's rate target, the outlook remains subject to two-sided risks that could necessitate either cuts or hikes depending on future economic data.
"I think that rates are in a good place."
Hammack, a voting member of the Federal Open Market Committee, characterized the current period as decidedly challenging for policymakers. She highlighted that recent energy price shocks tied to the conflict involving Israel have emerged following an extended period of above-target inflation, complicating the central bank's decision-making process.
"My baseline is that were going to remain on hold for a good while, but I do think that theres two-sided risk to rates."
The Cleveland Fed leader expressed concern regarding the duration of elevated energy prices and their potential impact on the broader economy. While high energy costs can be inflationary, they also risk dampening consumer spending, which could eventually manifest in lower growth and employment figures. Hammack observed that the frequency of these supply shocks makes it difficult for the Fed to treat them as temporary events, especially given the current inflationary backdrop.
"All of these successive supply shocks are hard to think about in terms of Fed policy actions."
At its policy meeting in March, the Fed maintained its interest rate target range between 3.5% and 3.75%. While some officials have projected a single rate cut later this year, Hammack has remained among the more hawkish policymakers, focusing on the persistent failure to achieve the 2% inflation target. She noted that the public has already experienced significant cumulative inflation over the past five years.
"Weve been above that 2% goal over the past five years. Individuals have experienced a decades worth of inflation...in that time period."
Hammack concluded that it is a prudent time for the central bank to remain patient and wait to see how economic data and geopolitical developments influence the inflation outlook.
